You don't need me to tell you it was a crummy rally, do you? Let's just take a look behind the move in the indexes to explain it.
We'll use Nasdaq, since Tuesday's rally was exactly 270 points. Last Wednesday, when the Fed met over rate increases, Nasdaq also rallied 270 points. This makes for an easy apples-to-apples comparison.
Net breadth last Wednesday for Nasdaq was positive 2,100. Tuesday brought us positive 1,800. So, right there you can see it wasn't great by comparison. Last week upside volume on Nasdaq was 80%. Tuesday gave us 72%. Yet last week folks stayed bearish (rightfully so) since the put/call ratio was 1.03, but somehow Tuesday inspired them and the put/call ratio was .89, the lowest in a month and the first reading sub .90 since then.
Now let me report that the lower reading for the put/call ratio has turned the 10-day moving average of the this metric down. And when it is heading down, it tends to mean the market can rally. And you thought I only had bad news for the market.
We are still oversold. A down day on Wednesday (yes that is a distinct possibility) would still have us oversold heading into the end of the quarter. I would get quite concerned if we couldn't rally more than this while we are this oversold. At this point I still think we are likely to roll back over in July.
Now take note that this last leg down in June has not thus far taken this indicator to a lower-low, even though all the major indexes made lower lows in June. Should it turn up from here, or at least up before making a lower-low it would be the first such instance in more than a year.
So what will it take to turn this back up?
Breadth on the New York Stock Exchange would have to be at least positive 900 to halt the current decline and obviously more to turn it up. The next week in the market, while we are still oversold, will be a test for this indicator to see if it is trying to signal a trend change.